Wages grew at the fastest rate since August 2021 when measured against inflation
The 5.7% rise in earnings figures in the three months to May compared with the year before is in line with the Bank of England's forecast so could help rate-setters decide to cut interest rates in August. The unemployment rate was unchanged in May.
Thursday 18 July 2024 12:32, UK
Wage rises have slowed, official figures show, potentially signalling good news for those hoping for a fall in the cost of borrowing.
But pay has increased faster than the overall rate of price rises.
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Earnings rose at an annual rate of 5.7% in the three months to May, data from the Office for National Statistics (ONS) showed.
In the same month, inflation stood at 2%. Because of reduced inflation and pay rises remaining high, the ONS said real wages - which adjust for inflation - grew at the fastest rate in nearly three years, 3.2%.
The figures are in line with economists and Bank of England forecasts so could help rate-setters at the Bank decide to cut in August.
Acting to keep the interest rate the same, however, is inflation data released on Wednesday which showed stubbornly high prices in parts of the economy.
The next decision is too close to call, though a cut is more likely after the latest ONS figures.
Before the data release markets priced in a 64% likelihood of no rate cut, according to data provided by the London Stock Exchange Group (LSEG). Those odds fell to a 58% chance of no change.
Who cares about wages - other than employees?
Wage data is a particular area of focus for the Bank, especially as employment data from the ONS has been unreliable in recent months.
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The statistics agency has changed how it calculates labour market numbers due to the low take-up of their previous surveys.
Today's numbers will also have been impacted by the 9.8% minimum wage rise which came into effect in April.
The increase is likely to have only taken effect later in the month at some companies and it will have influenced May figures as a result.
What's going on with the labour market?
There was no change in the rate of unemployment which remained at 4.4%.
Fewer jobs were available too but still more than before COVID-19 hit in 2019.
"We continue to see overall some signs of a cooling in the labour market, with the growth in the number of employees on the payroll weakening over the medium term and unemployment gradually increasing," the ONS said,
"The number of job vacancies is down across most sectors, led by retail and hospitality. The total has now been falling for a full two years, though it remains above pre-pandemic levels."
The number of people neither in work nor looking for work - classed as 'economically inactive' - was 22.1% of those aged 16 to 64.
Such people tend to be students or retired but since the COVID-19 pandemic, the numbers have grown with long-term sickness levels higher.
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The ONS on Thursday said the current economic inactivity rate is higher than estimates of a year ago. The Department for Work and Pensions put the number of 'economically inactive' people at 9.4 million.